Monthly chargeoffs in U.S. prime credit card asset-backed securities fell to a new low of 2.33% in December, according to Fitch Ratings’ monthly index results.
However, retail credit-card performance featured “mixed” results, with chargeoffs rising but improvement seen in monthly payment rate (MPR) levels.
The agency’s Prime Credit Card Chargeoff Index ended the month 10 basis points below its previous record low of 2.43% in October 2016, and is 10% lower year-over-year. The rate is almost 80% below its alltime high reached in September 2009.
The 60-plus day delinquency index rate rose three basis points to 1.04%, well below the historical high of 4.54% of December 2009, according to the agency.
These chargeoff levels are expected to remain benign in the near future, even with an increase in the federal funds rate to between 0.5% and 0.75%. Fitch believes the Federal Open Market Committee’s Dec. 14 action will have only a “negligible impact” of most credit-card borrowers and ABS portfolios in the short- to medium-term outlook.
The upbeat outlook is also boosted by the climb in the consumer confidence index in December.
Fitch’s Prime Credit Card Index tracks approximately $138.4 billion of prime credit-card ABS, supported by over $222.2 billion of principal receivables from cards originated by Bank of America, Citibank, Chase, Capital One, Discover and others, the agency reports.
In the retail-card index, comprised of $20.6 billion of securitized retail or private-label credit-card accounts, the chargeoffs increased for a fourth straight month to 6.85%. That is 6% higher year-over-year. The 60-plus delinquency rate held steady at 2.63%.
The MPR Index improved to 15.67% in December.
The retail credit card index is comprised of private-label portfolios originated and serviced by Citibank, Synchrony Financial and Comenity Bank; as well as cards issued for more than 165 retailers such as Walmart, Sears, Home Depot, Federated, Lowes and J.C. Penney.